During our long number of years processing insurance claims, the “average” clause has become a major issue with some claims and remains quite a debatable issue between our office and insurers representatives.
Most of the established surveying guides will compile a guide for the rebuild costs every year which divide Ireland into seven different areas.
These prove useful guides if the property is definitely located within the area stated however the areas where the properties remain on the peripheral of the area proves debate able and causes confusion. The rebuild costs for a Detached Property within the Dublin Area are €1,868 per M² and the rebuild costs within the North East area for a similar property are €1,483per M², in essence it costs approximately 26% more to build a property in Dublin as opposed to the North East.
Therein lies the problem, technically Swords, Co. Dublin is in the Dublin Area and Ashbourne, Co. Meath is in the North East area therefore by this guide it states that it costs 26% more to build in Swords. This guide wouldn’t create an issue if insurers rates were 26% more for Swords Co. Dublin however sadly they don’t really vary that much between the different areas. From the cheapest area being the North West to Dublin is costs over 50% more to build in Dublin as opposed to the North West. Most guides don’t define the North West area neither do they define the North East, so if the insured lives in south Cavan what exactly is the sum insured? Should you be linked to the North West or the North East, with the guide stating “wherever you are nearest too” as being the rate applicable.
The use of a composition of rates has settled claims in the past, however we do note that in these uncertain times inexperienced loss adjusters are nervous of this very step therefore who ultimately pays the price for a guide that doesn’t clearly define each area?
For the prudent broker advising their client, they advise accordingly however it would be fair to state that there may be an element of over insurance in certain areas to which the client will receive no benefit.
The rates provided in terms of payment when a claim is presented do not suddenly increase or decrease by over 50% as per the established guides therefore how can insurers legitimately state that this is the correct way to value the risk. If they provide uplifts within the settlement rates that are in line with the varying guide estimates the issue wouldn’t be as severe because the policyholder would be in a similar position due to the very fact that it doesn’t cost 26% more to build your property in Swords as opposed to Ashbourne. Insurers are using these guides to manipulate claim payments to their benefit and indeed leave all relevant parties exposed when claims are presented.
Another issue we constantly face is the valuations of farm buildings and the large variant between the types of construction methods and quality used, they can be defined as listed
- Historic Buildings – Generally Stone Buildings. Walls are usually quite thick with a slated roof.
- Pre grant aid sheds – Can be of good quality and in good repair.
- Grant Aid Sheds – High Quality construction and should stand the test of time.
- Self-Built Sheds – Variant degrees of quality.
While Teagasc have provided some guidance in terms of rebuild costing’s however there are some discrepancies within their calculations due to the fact that when grants were no longer available in 2008 the price to rebuild all farm buildings plummeted and in some cases by over 50%. We find that a useful guide for the valuation of sheds is the department of Agriculture’s guide which was printed on the 9th of June 2016 which provides a more accurate guide to the relevant costing’s applicable.
Is there a better way of insuring farm buildings, i.e. first loss whereby the policyholder can insure the building without being liable for average, omitting the slatted tank from the costing’s, etc. surely farmers shouldn’t be insuring slatted tanks and the likes where no risk of storm or fire is possible.
I do note there currently is no definitive guide for period homes and by their very nature provide a complex issue which could be possibly greater than the aforementioned points.